Google Wallet is not just about mobile payments

By Kevin WoodwardSenior Editor

The new service’s true target is the data from coupons and special offers, says Forrester.

The smartphone-based payment scheme includes an coupon and deals component.

When Google Inc. announced last week its new mobile payments service, Google Wallet, the buzz was all about enabling consumers to pay for merchandise using their smartphones. But the payments are not what really interest Google—it’s the consumer data behind the payments and associated special deals and what that data will reveal about consumer and merchant behavior that will reap rewards for the search engine giant, Forrester Research says.

Google’s product strategists are focusing not on the payment itself, Forrester says in a research note, but on the associated coupons and offers consumers are expected to accept from participating merchants. Integral to Google’s mobile commerce effort is the inclusion of Google Offers, a deal service that enables merchants to offer coupons redeemable via the Google Wallet.

Tying the payment mechanism to a merchant offer could create valuable data for Google, Forrester says. After examining the data, Google can generate behavioral profiles based on the information. “Incorporating real-world purchasing behavior into these profiles will vastly increase the value of those customer profiles and increase the rates Google can charge its advertisers,” Forrester says.

Google Wallet relies on Near Field Communication, a wireless technology that enables devices to exchange information—including payment card data—over a short distance. It will enable a consumer to pay for goods in a store by waving a smartphone with an NFC chip near an NFC-enabled terminal. NFC uses a merchant’s point-of-sale system to initiate and authorize transactions. But NFC transactions require merchants to upgrade point-of-sale system hardware—a big hurdle—and handset makers to embed NFC chips in mobile phones—another hurdle, though one that is being addressed as some handset manufacturers have begun including chips in their devices. Initially available on Google’s Nexus S phones on the Sprint network, Google Wallet will be free for consumers and merchants.

While Google Wallet could advance mobile commerce, it remains within the bounds of the traditional payment process. Google is relying of the existing payment system structure, which includes card-issuing banks, payment processors and payment networks, for Google Wallet transactions, Forrester says. “With this approach, Google is protecting these partners against mobile payment disruption,” Forrester says.

Overall, Google Wallet’s impact in the near term is negligible because it is limited to one phone on one wireless network and one type of payment card, Forrester says.

That’s hardly news to Google. “We’re starting with one phone and one type of payment network and we will build from there,” a Google spokesman says. “We realize there are a certain number of phones and POS terminals out there today. We know that.”

It is in the long term that Google Wallet stands to make the most difference, Forrester says. “The longer-term impact is potentially much more significant,” the firm says, “and another sign that consumer product strategists need to anticipate the disruption created by new entrants in the payment value chain.”